Strong demand from investors lifts home sales in February to the highest level for that month in five years. Because many of those deals were for less than $200,000, median prices fell.

In February, 15,573 houses and condominiums throughout the Southland… (Genaro Molina, Los Angeles…)

A Southland home sales recovery gained steam in February as a record number of deep-pocketed investors snapped up distressed properties at bargain-basement prices. With so many purchases of low-end homes, median prices remained in a slump.

The influx of cash from speculators helped push February sales to their highest level for that month in five years, real estate firm DataQuick reported Wednesday. The increase was fueled by purchases of properties costing less than $200,000. Sales of homes costing more than $800,000 sank.

The activity on the low end helped push the region's median price down 3.7% from February 2011. At $264,750, the median — the point at which half the homes in the region sold for more and half for less — is now just 7.2% above the market's 2009 bottom, reached during the worst of the financial crisis.

In related news, the foreclosure picture improved throughout California last month, according to Irvine data tracker RealtyTrac.

In Los Angeles and Orange counties, all forms of foreclosure filings fell 18% in February from a year earlier. Filings include notices of default, notices of foreclosure sales and repossessions. Foreclosure filings dropped 11% in the Inland Empire and 9% in San Diego County over the same time period. Nationwide, February filings declined 8% from a year earlier.

Longtime Los Angeles real estate agent Leo Nordine said Southern California's housing market has probably hit bottom, but he added, "prices are going to be flat as a pancake this year."

Investors seeking to refurbish foreclosed properties and either resell them to first-time buyers or rent them out were flooding the real estate market at an unprecedented level, Nordine said.

"I've never seen it like this before," Nordine said. "There are so many investors buying right now it's insane. The top 1% is buying up all the real estate."

Big-money investors, including Wall Street hedge funds and private equity firms, are positioning themselves to snap up foreclosed homes and convert them into rental units. Billionaire investor Warren Buffett, for instance, said in a recent cable news interview that he would buy foreclosed homes if he could find the right way to manage those properties.

"Single-family homes are cheap now," Buffett told CNBC. "If I had a way of buying a couple hundred thousand single-family homes and had a way of managing [them] ... I would load up on them."

Wall Street types are aiming to do exactly that. A spokesman for New York buyout firm GTIS Partners said it plans to spend $1 billion through 2016 purchasing single-family properties and converting them to rentals. Oaktree Capital Management of Los Angeles recently announced it had started a fund that would buy $450 million worth of single-family homes.

Also in Southern California, G8 Capital of Ladera Ranch has bought several portfolios of distressed properties that it plans to rent out. The real estate investment firm McKinley Capital Partners of Oakland has purchased hundreds of homes in the San Francisco Bay Area.

Mia Melle, president of RentToday.us, a company that manages rental homes for investors throughout Southern California, said many of her clients were now private equity funds.

"Those guys are hot and heavy on the market buying houses — as many as they can possibly get their hands on," Melle said. "That's the main thing we are dealing with."

The Obama administration is looking to capitalize on this interest by selling to investors pools of foreclosed homes owned by mortgage titans Fannie Mae and Freddie Mac as well as the Federal Housing Administration. The administration hopes to use investors to convert some of the nearly 250,000 foreclosed homes owned by government-controlled entities into rentals. Fannie recently listed for sale about 2,490 homes in some of the nation's hardest-hit markets, including about 484 in Los Angeles and the Inland Empire.

But investors flush with cash are already busy buying foreclosures and other distressed homes. A record 29.7% of previously owned properties sold last month were bought by absentee purchasers, who paid a median $192,750. The Inland Empire was the epicenter of this activity, with absentee buyers accounting for 37.2% of sales.

In total, 15,573 houses and condominiums were bought throughout the Southland in February. That was a 7.2% increase from January and an 8.4% jump from February 2011.

Excluding sales of new homes, foreclosed properties accounted for about 1 in 3 sales. Short sales — in which a bank allows a home to be sold for less than what's owed on the mortgage — made up about 1 in 5 sales.

Many observers expect the long-suffering housing market to finally hit bottom in 2012, particularly if the jobs picture brightens. But foreclosures, tight mortgage credit and high regional unemployment remain significant impediments to a housing recovery.

Unemployment is still a harsh reality for many in Southern California. The jobless rate was 11.8% in Los Angeles County in January, a drop from 12% in December. In Orange County, The rate rose to 8% from 7.8%. In the Inland Empire, it rose to 12.4% from 12.2%.